Most BOJ Watchers Expect Ueda to Hold Policy at First Meeting

Bank of Japan Governor Kazuo Ueda will leave monetary stimulus unchanged at his first policy meeting next week, according to a Bloomberg survey.

(Bloomberg) — Bank of Japan Governor Kazuo Ueda will leave monetary stimulus unchanged at his first policy meeting next week, according to a Bloomberg survey.  

Some 87% of 47 economists said they forecast Ueda to keep all key policy settings for interest rates and asset purchases untouched at the end of the two-day meeting on April 28, according to the poll. Of the other respondents, 11% forecast a policy tweak while 2% expect a tightening step. 

Almost 40% of economists see June as the most likely time for a policy change, largely in line with the previous survey last month. July is now seen as the second most likely month with 19% of responses, taking over from April in the last poll. 

The survey was conducted before Bloomberg reported that BOJ officials are wary of tweaking or scrapping the central bank’s control of government bond yields at the meeting, according to people familiar with the matter. 

Read More: BOJ Is Said to Be Wary of Tweaking YCC Soon After Banking Crisis

Click here for the full results.

Ueda, the first new BOJ chief in a decade, will come under an intense spotlight at the gathering after inheriting a massive stimulus program from his predecessor Haruhiko Kuroda. Ueda has struck a slightly more dovish tone than many BOJ watchers expected over the past month, prompting some economists to push back their calls for change. 

Still, 74% of the polled economists said the BOJ will move toward tightening by the end of this year. Financial turbulence after the failure of Silicon Valley Bank and the sale of Credit Suisse has likely pushed back the timing of possible policy change, according to 57% of respondents. 

An adjustment of guidance on future policy ranked as Ueda’s most likely first policy step. Some 62% of economists chose that option, with multiple answers permitted. Scrapping yield curve control was the second most popular choice, followed by a further widening of the movement band around the 10-year yield target. 

While almost two thirds of respondents said the functioning of financial markets hasn’t improved since the BOJ moved in December to mitigate some of the side effects of policy, only a third said Ueda should tweak or scrap the YCC at this meeting.

At his inaugural press conference, Ueda said it’s appropriate to continue with yield curve control given the state of economy, inflation and financial system. 

Still, there is a widespread view among investors and analysts that any change in YCC has to come out of the blue to avoid a surge of market pressure beforehand. But if abrupt change is due, economists see it coming after April’s meeting. 

“A surprise is unnecessary and undesirable for the first meeting after Ueda’s leadership just launched,” Yasunari Ueno, chief market economist at Mizuho Securities, wrote in a survey response. “It also goes against Prime Minister Kishida’s requirement that the BOJ governor has an ability with communication.”

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